Don’t Be the FTC’s Next Target

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Make sure your Income Disclosure Statement stands up to scrutiny.

A direct seller’s Income Disclosure Statement (IDS) is a resource used to set earning and expense expectations. It is vital that direct sellers accurately disclose the business experience in their IDS. And the Federal Trade Commission (FTC) has made it clear that it is laser-focused on—and has high expectations for—the contents and use of an IDS.

Here, we’ll discuss the current regulatory environment surrounding deceptive earnings claims and identify best practices direct sellers should consider in order to avoid becoming the low-hanging fruit accused of making (or facilitating) deceptive claims.

Those best practices include:

• Using reliable proxies to identify distributors engaging in business-building activities within a defensible look-back period and including all such distributors in the IDS;
• Accurately representing distributor earnings by, for example, reporting median earnings, the earnings distribution and earnings/share of distributors by highest rank achieved;
• Clearly and conspicuously disclosing the number of distributors who had no documented earnings;
• Clearly and conspicuously disclosing that the earnings represented are gross;
• Clearly and conspicuously disclosing business-related expenses readily identifiable in the data, including the amount thereof (e.g., registration/renewal fees, website fees, shipping, conference fees) and other expenses not readily identifiable (e.g., travel, lodging, food, internet); and
• Implementing a robust IDS compliance program and providing distributor training on the proper use of the IDS and strict enforcement thereof.

Best practices will look different for each direct seller, as the FTC has recognized that “what constitutes a reasonable basis is fact-specific and depends on the claim that is being made and the surrounding circumstances.” Each company should work with experienced counsel in creating an IDS that is both accurate and fully substantiated.

Regulatory Focus on Deceptive Claims and Disclaimers

In the FTC’s battle against Neora, the FTC alleged Neora violated the FTC Act “by making deceptive representations that Neora [distributors] are likely to earn a substantial income.” In 2023, the Neora court soundly rejected that allegation, relying in part on the fact that Neora created an IDS; instructed its distributors how to use it; and policed such use. The court also noted that the FTC neither challenged the substance of Neora’s IDS nor provided evidence related to its impact on distributor decision making.

Reading the court’s tea leaves, the FTC took action. In April 2024, the FTC published its updated Business Guidance Concerning Multi-Level Marketing, which emphasizes that earnings representations should reflect the experience of a typical distributor and must be based on reliable evidence. The 2024 Guidance details the FTC’s view of the proper substance of an IDS.

Shortly after, Bosley et al. published research on the adoption of self-regulatory guidance in direct selling “as it relates to earnings claims and disclaimers.” Their key finding: “actual disclaimers [direct sellers were using at the time of Bosley et al.’s research] have no impact, while guidance-aligned disclaimers do impact consumer judgments and interest.” The FTC will likely rely on this research in arguing that direct sellers must ensure their distributors are instructed on proper IDS use and strictly police them.

Clearly, the FTC and other regulators are laser-focused on curing perceived deficiencies exposed in Neora. And they’re not just talking—they’re taking decisive action. In April 2026 alone, the FTC entered consent judgments with Forever Living Products, Stormy Wellington and Steven and Gina Merritt, with deceptive earning claims driving each enforcement action.

So, what best practices can direct sellers employ to avoid becoming the next target?

The FTC’s IDS Guidance and Compliance

Since early 2024, the FTC has published three documents summarizing its views on IDS. Boiling the guidance down, the FTC considers the following when assessing a direct seller’s IDS:

1. Has the direct seller included all participants except those who do not exhibit behaviors consistent with a desire to pursue the earnings opportunity?
2. Has the direct seller accurately represented the experience of a typical distributor by, for example, reporting median earnings, the earnings distribution and earning/share of distributors by highest rank achieved?
3. Has the direct seller clearly disclosed the number of distributors who had no documented earnings?
4. Has the direct seller clearly disclosed whether earnings are inclusive of costs and disclosed typical business expenses, such as costs of travel for conferences, sales aids or trainings?

Where a direct seller cannot reliably capture the experience of a typical distributor, the FTC demands that it “refrain from making any earnings claims and ensure its participants do the same.”

We do not take a position as to whether the FTC’s guidance aligns with the law. Rather, we have taken it at face value and identified best practices that direct sellers should consider in crafting (or updating) their IDS. Every company is different, but where appropriate, deploying the practices identified in the introduction can significantly reduce exposure to deceptive claims allegations.

Robust IDS Compliance Programs Are Vital

Turning from substance to use, direct sellers can further reduce their exposure through IDS compliance training and enforcement. Best practices include:

• Strict prohibitions on misleading earnings claims, with examples of prohibited claims;
• Mandatory use of clear, conspicuous and prominent disclaimers where truthful claims are permitted, with examples of proper IDS use; and
• Records demonstrating strict enforcement of these prohibitions and guidance.

Direct sellers engaging in these compliance practices are much less likely to become the target of deceptive claim allegations. Our client’s goals always align as to at least one thing—reduce exposure to costly regulatory investigations wherever possible. We hope this article provides practical guidance in doing so.

Katrina Eash is a Partner at King & Spalding, LLP. She has substantial experience defending direct selling companies in high-stakes, bet-the-business disputes. She has successfully defended dozens of direct sellers facing class claims and regulatory investigations. She also regularly advises direct sellers on best practices and regulatory compliance.

Branko Jovanovic, Ph.D. is a Partner, and Juliet Bellin Warren is a Managing Consultant at Edgeworth Economics which offers testimony and consulting services to direct sellers facing regulatory and litigation challenges. They combine innovative economic analysis, combined with in-depth industry experience, to assist clients in complex matters.